Due to the global economy, the spatiality is more and more important issue. In the past, usually spatial organization based on nation level, for now this is fundamentally transformed to regions.

1. „With reference to the new economic geography, examine the
impact of economic integration on the distribution of economic
activity across regions and countries”
Attila Németh
12.06.2014.
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2. Contents
• Economic Geography
• Arguments
• Approaches
• Factors and forces
• Changing economic environment
• New Economic Geography
• Difference between NEG and Location theories
• Space narrowing factors
• Production and products
• Transnational companies
• Virtual and real space
• Summary
• References
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3. Economic Geography
• A regional competitiveness that is closely related to economic
geography and regional economy, the development of regional
economy and typology of regions have been defined previously.
• Porter emphasizes that geographical concentration of a business
enhances the productivity, innovation and sector export.
• According to Paul Krugman, for a international company which is
trading on the entire world needs to be organized on global and
regional levels, and also the firm must know the various geographic
locations endowments and differences.
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4. Arguments
• NEG cannot be readily or adequately expressed in mathematical form
• Krugman himself, who argued that such factors were the province of sociologists
• NEG models based on the highly simplified assumptions
• NEG models relating to economic structure, consumer and firm behaviour,
competition, and transport costs, can provide credible representations of the real
world they are meant to explain.
• Economic geographers place production at the centre of spatial economic
development
• Non-economists, this might sound like a banal and obvious gain, but it is
important. Stated Cities and regions can develop simply because people decide
that they like to go there and production can follow them
• More collaboration between economists and economic geographers could lead
to more impact of the economic activities to countries or regions, and it could
bring more ‘Krugman moments’
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5. Approaches
• The results are strongly influenced by the researcher's methodological
approach.
• Neoclassical location theorists, following in the tradition of Alfred Weber,
tend to focus on industrial location and use quantitative methods.
• Marxist political economy, growing out of the work of David Harvey: the
new economic geography which takes into account depend on social,
cultural, and institutional factors in the spatial economy.
• Paul Krugman and Jeffrey Sachs have also analysed many characteristics
related to economic geography. According to Krugman has gone so far as to
call his application of spatial thinking to international trade theory the NEG,
which directly competes with an approach within the discipline of
geography that is also called "new economic geography".
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6. Factors
• Regional economic geography examines depends on the economic
conditions of particular regions or countries of the world.
• There is a war between forces that tend to promote geographical
concentration.
• Which Focus on production, exchange, distribution and consumption of
items of economic activity.
• And Examine material flow, commodity flow, population flow and
information flow from different parts of the economic activity system.
• Analysing of flow and production, amongst industrial areas, rural and
urban residential areas, transportation site, commercial service facilities
and finance and other economic centres are linked together in an
economic activity system.
• Thematically, economic geography can be divided into the following sub
disciplines: geography of agriculture, industry, international trade,
resources, transport and communication and finance. 6

7. Forces
• The economic geography, focus on a more limited set of forces,
however, real world is more complex.
• Beside the natural things there are two types of forces (centripetal
and centrifugal), and the tension between just one centripetal and
one centrifugal force.
• Centripetal forces (towards the centre) as market-size effects, thick
labour markets, pure external economies, on the other side are
centrifugal (away from the centre) forces like immobile factors, land
rents, pure external diseconomies.
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8. Changing economic environment
• The linkages amongst Forces effect and as the force for concentration,
immobile resources creating the tension necessary to keep of this model
interesting.
• Linkage effects, which are mediated by transportation costs, are naturally
tied to distance, so it is access to immobile factors. On the other hand,
thickness of the labour market, while it must have something to do with
distance, does not lend itself quite so easily to being placed in a spatial
setting.
• The central thrust forces of the NEG work to date, in short, has been driven
by considerations of modelling strategy toward an approach that
concentrates on the role of market-size effects in generating linkages that
foster geographical concentration, on one side, and the opposing force of
immobile factors working against such concentration on the other.
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9. New Economic Geography
• According to Krugman, New Economic Geography exactly in order to
become "new" because the economic geography are integrated into
classical trends and theoretical models. These models are in
addition to the classical theory of localization in highly rely on the
"new growth" and "new trade theory" trends as well. Many
economic activities are markedly concentrated geographically.
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10. Geographers vs. Economists and limitations
• Both geographers and economists are interested in change in the spatial pattern
of the economy, in how territories develop under open economy conditions, and
in identifying and measuring the forces of change.
• The core-periphery model of the NEG is basically a central place model with
labour mobility added: economies come from firm-level product variety (units),
and home market effects (local consumption). -no true spatial externalities (no
natural differentiation or even comparative advantage).
• Monopolistic competition framework of the NEG - allows firms to set their own
prices and to produce differentiated goods under increasing returns to scale. - no
strategic interactions ( no quasi-rents to place-bound actors and firms and
regional economies) therefore, there can be equilibrium, as economists need
there to be.
• In the complex world there are strategic interactions and rents, and these are
parts of the real way that agglomerations function.
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11. Difference between NEG and location theory
• Location theory is partial equilibrium
• By contrast, the NEG consists of full general-equilibrium models, in which
budget constraints on both money and resources are carefully specified
and honoured; the geographical distributions of population, demand, and
supply are endogenous, and it is, indeed, the two-way feedback between
location decisions by individual agents and these distributions that is the
main source of interesting stories.
• Location theory-especially the central place theory of Christaller and Lösch,
describing planning solutions rather than market outcomes.
• NEG is all about what spatial equilibrium might exist, and perhaps emerge
through a dynamic process, when individuals are choosing locations to
maximize their welfare given what other individuals are doing.
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12. „Space narrowing” factors
• Information technology the basic of the globalization
• New transportation and communication technologies.
• The development of communication has transformed the space-time
relationships between all parts of the world. Increasingly disappear the
spatial and time limits which are previously separated from each other
international economies.
• That's not affected equally all geographic locations.
• Geographical sites, which are able to take advantage of the benefits of this
communication innovations, the important destinations for world of
information.
• Rapid technological development is very important and essential to the
production, and the production processes of change.
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13. Production system is changing
• The Fordist production system characterized by a very large flow-line
production units, which produced a type of high-volume standard
products are mass-consumption purposes.
• The new production system, is flexible: instantly changeable
corporate organization and most of the close relationship between
companies and customers, and the needs of the market.
• The strong market competition in the manufacture of new products,
and constant innovation is essential for the profit of the companies,
and in general the companies afloat.
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14. Five stages of products by Vernon: introduction,
growth, maturity, decline and obsolescence
• In general we can say that the competitive advantage is more and
more changing from research and development to the price, which
requires a different combination of factors of production.
• New product is needed very significant R & D expenditures, and
highly trained workforce, product-specific technology.
• In the growth needs shifting to the requirement of basic skilled
manpower, and to production technology and cost minimization.
• Indisputable fact that because of the modern communication
technologies the geographical boundaries of national economies lose
their former separation, and the earlier strong regional concentration
of economic processes.
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15. Parallel development
• In the 21st century the regional de-concentration of economic and
the concentration processes is re-emerged at the same time, notably
through the established research and development activities by
technological areas, in other words, industrial districts. In the case of
industrial districts in the locality, a district wide web connection is the
focus. This local business network main points are the following: the
local business community, local government agencies, local
universities and research institutes, as well as local non-state public
institutions.
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16. Transnational companies
• The geographical distribution of parent companies and subsidiaries,
however, are extremely inequality. Basic factors of localization for
international business policy decisions are that nearly 80% of the
parent transnational companies are located in developed countries,
but almost 90% of their foreign subsidiaries operate in the low and
middle-income countries. East and South East Asia regions and
Central and Eastern European regions.
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17. International investments
• Four main types of international investments according to the nature
of the investment: exploiting local resources, market-oriented,
efficiency improvement, effect to the strategic benefits.
• The choice of the firms also done by property-specific, localization
and internalization advantages.
• The most accepted theory which is eclectic theory creating by
Dunning.
• The eclectic theory paradigm is based on the assumption that
operation will avoid transactions in the open market when internal
transactions carry lower costs.
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18. Spatial structure, worldwide sales and intra-firm trade
Three aspects of spatial structure:
• intra-firm trade (growing, but transfer price is a problem),
• company headquarters geographic location (increasing strategic role),
• the unit of production based on localization (production cost).
• The spatial structure of the company, the headquarters strengthens the
concentration, while the organization of the global level of production
forwards the company to the direction of the spatial de-concentration.
• Amongst the world's largest companies would be required further
investigation on the ratio of spatial structure between concentration and
de-concentration.
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19. Dickens’ four basic type of production
• Centralised globally focused: the total production process localized to a single
geographic location and the products reach the world market through the
marketing activities and the sales network of transnational corporations. (luxury)
• „Stand-alone" or often is called „Multi-domestic": production is only for the host
country market. The production system related to the size of the regional market.
(soft drinks)
• Regional specialization: production network involves a spatial division of the
production based on comparative advantages. Each region specializes in the
production of a specific good and imports from other regions what it requires.
• Transnational vertical integration: production of semi-finished products occur in
different locations geographically and for the final assembly these parts are sent
to other kinds of geographical location within the framework of intra-industry
and intra-firm trade, using the communication and transportation technology.
(automotive)
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20. Virtual- and Real space
• The principle of electronic data can be delivered anywhere in the
world, regardless of the actual geographical distance, or whether
there is even what time of day.
• The most important leading sectors of the new economy are in the
cyber space, the hardware and software manufacturing,
telecommunications, biotechnology, the film industry, financial
services and tourism.
• Real space is loosing its importance and these high-tech sectors
switch from manufacturing-based economies to the digital economy.
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21. Summary
• Due to the global economy, the spatiality is more and more important issue.
In the past, usually spatial organization based on nation level, for now this is
fundamentally transformed to regions. Key elements of the spatial
organization of the global economy can be summarized as follows:
• The spatial concentration is took part of the global economic activities. (That
is one of the most important findings what Paul Krugman is justified.)
• The spatial de-concentration processes can definitely be detected.
• Relative geographic position loses significance.
• Availability of geographic locations is growing importance, since the real
space is transformed to virtual space.
• Space of flows instead of space of place approach seems to be justified.
• Complex spatial structure is emerging, which is called by Dicken, a stage of
constant change in the inequalities, and the key word now of the virtual
spatial organization is network. 21

22. 22
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23. Thank You For Your Attention!
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